Corruption is costing Europe £100bn says EU

MARTYN McLAUGHLIN

CORRUPTION across the European Union is costing member states nearly £100 billion a year, according to a damning report which reveals that three out of four people in the continent believe the problem is “widespread” in their country.

European commissioner Cecilia Malmstrom said the issue was “undermining” confidence in the democratic process and depriving countries of crucial tax revenue, in the wake of the first study into corruption across the region.

Although the probe found that many nations have taken steps to combat corruption, it continued to impact on all 28 member states of the EU, with a total annual cost of £99.3bn, almost on a par with the value of the Romanian economy.

In Britain, almost two-thirds of people – 64 per cent – believed corruption was widespread, with 59 per cent convinced that corruption had increased over the past three years.

Anti-corruption campaigners said the findings asked “important questions” over how the EU deals with corruption and posed challenges for the British ­government.

The report – which included two opinion polls on perceptions of fraud among citizens and companies – found more than half of Europeans (56 per cent) think the level of corruption in their country has increased over the past three years.

In its assessment of Britain, the study found that more had to be done before the country could be handed a clean bill of health. It suggested the governance of banks could be “further strengthened” and donations to political parties and electoral campaigns should be reigned in.

It added that progress could also be made to address the risk of foreign bribery in “vulnerable industries such as ­defence” and in improving transparency in out of court settlements in corruption cases.

A survey of 1,308 people in Britain, meanwhile, found that 90 per cent of people agreed with the statement that “there is corruption in national public institutions”, while 76 per cent agreed that there is corruption in local or regional public institutions.

More than half of those questioned (56 per cent) said they thought political parties were affected by the giving and taking of bribes and the abuse of power, lower than the EU average of 59 per cent.

Some 16 per cent of Britons said they were personally affected by corruption in their daily life, while 8 per cent said they had experienced or witnessed an instance of corruption in the past 12 months.

However, only five people (less than 1 per cent) said they expected to pay a bribe, the lowest in all of Europe.

The EU Anti-Corruption Report said that petty corruption “does not appear to pose a challenge” in the UK and praised the country for making “strides in encouraging its companies to refrain from bribing officials abroad through stringent legislation and detailed guidelines”.

It added: “Traditionally, the UK promotes high ethical standards of public service.”

Europe-wide, Greece emerged as the nation with the gravest corruption issues, with a resounding 99 per cent of residents believing that the problem is widespread.

Among businesses in Europe too there is a strong belief that the only way to succeed is through political connections. Some 75 per cent of firms said corruption is widespread, with 43 per cent believing fraud is an obstacle to doing business. Greece, Italy and Spain were found to be the worst places to trade.

Construction companies, which often tender for government contracts, were the most affected. Almost eight in ten of those asked complained about corruption.

Unveiling the report in Brussels yesterday, Ms Malmstrom said the extent of the problem in Europe was “breathtaking”.

She said: “Corruption undermines citizens’ confidence in democratic institutions and the result of law. It hurts the European economy and deprives states of much-needed tax revenue.

“Member states have done a lot in recent years to fight corruption but today’s report shows that it is far from enough.”

She added: “We are simply not doing enough. That is true for all member states. Existing laws and policies are not enforced enough and a firm political commitment to root out corruption still seems to be missing.”

Robert Barrington, executive director of leading anti-corruption organisation Transparency International UK, said that although the report “does not break new ground”, it raised “important questions”.

He said: “It will doubtless be more controversial in other countries, where corruption is more rampant, and will raise important questions about what the EU is doing to combat ­corruption in the states where it is worst. As part of the single market they inevitably affect other EU member states, including the UK.”

Focusing on Britain, Mr ­Barrington said: “The message for the UK is clear. There is definitely room for improvement, with still a remarkable indifference to corruption in the financial crisis and politics.

“The UK must avoid complacency – compared to some other countries it’s good, but not that good.”

The study does not rank countries according to the prevalence of corrupt practices, but Ms Malmstrom acknowledged that some of the “younger democracies” in Eastern Europe face special challenges.

The report found corruption is more present at local and ­regional levels, and that in some EU countries it is especially frequent when it comes to obtaining heathcare, or in the construction and promotion of building projects in urban areas.

The report calls for a number of broad improvements to address corruption. Ms Malmstrom said that in some member states, vulnerability to corruption in public procurement processes is the main problem. In others, political party financing is not transparent enough.

Another report will be compiled in two years’ time to “take stock” of how the issue has been approached and Ms Malmstrom vowed to “engage in a dialogue” with EU nations and the European Parliament.

She explained: “Needless to say, it will take more than one report to root out corruption, but as Europe is finding its way out of the economic crisis, we cannot afford to drag our feet.

“We hope that this will start a political process and will spur the political will and the necessary commitment at all levels to address corruption more effectively across Europe. The price of not acting is simply too high.”

Carl Dolan, director of the EU office of Transparency International, said it was to the credit of the EC that it issued such a critical report in a year when voters will elect a new European ­Parliament.

He said: “What the report shows is that there has been a consistent failure among politicians to regulate their conflicts of interests, particularly in their dealings with business and ­industry.”

The publication of the report comes shortly after Romania’s former prime minister, Adrian Nastase, was sent to jail for four years for taking bribes.